UK: The Companies (Shareholders’ Rights to Voting Confirmations) Regulations 2020

The Companies (Shareholders’ Rights to Voting Confirmations) Regulations 2020 were laid before Parliament on July 9 and come into force on September 3: see here or here (pdf). The Regulations complete the UK's transposition of Chapter 1a of EU Directive 2017/828 (amending Directive 2007/36/EC) (known as the Shareholder Rights Directive). Further information is available in the accompanying explanatory memorandum (here, pdf) and transposition note (here, pdf).

UK: The Proxy Advisors (Shareholders’ Rights) Regulations 2019

The Proxy Advisors (Shareholders’ Rights) Regulations 2019 were laid before Parliament yesterday and come into force on 10 June: see here or here (pdf). The Regulations are accompanied by an impact assessment and explanatory memorandum: see, respectively, here (pdf) here (pdf). The Regulations introduce a new transparency framework for proxy advisors; as the memorandum explains (para. 2.1):

This instrument transposes Article 3j of the revised EU Shareholder Rights Directive (SRD II) into UK law, in line with the UK’s obligations as a member of the EU. Article 3j of SRD II places requirements on proxy advisors, which primarily offer voting services and/or advice to shareholders in publicly listed companies, to make certain disclosures about the way in which they conduct their business". 

Under the framework being introduced by the Regulations, the Financial Conduct Authority will become responsible for enforcing the new requirements placed on proxy advisors, including the obligation to disclose publicly the code of conduct* that has been adopted (with an explanation provided if a code is not adopted). Proxy advisors will be required to notify the FCA if they fall within the new framework and the FCA will maintain a public list.

* - The BPP Group is currently revising its Best Practice Principles for Shareholder Voting Research. The review is expected to be completed next month; an update on the review was published last month: see here.

UK: encouraging effective stewardship

Under the banner of 'encouraging effective stewardship', there are several developments to report today. First, the Financial Reporting Council has published a consultation paper setting out proposed revisions to the UK Stewardship Code: see here. Second, and connected with the FRC's consultation, the Financial Conduct Authority has published two documents: (1) a consultation paper on regulatory measures to implement the provisions of the amended Shareholder Rights Directive for FCA-regulated life insurers and asset managers; and (2) a discussion paper, with the FRC, on the importance of effective stewardship, considering, for example, what should be the minimum expectations for financial services firms investing for clients and beneficiaries.

EU: Shareholder Rights Directive published in the Official Journal

The new Shareholder Rights Directive (Directive (EU) 2017/828), amending Directive 2007/36/EC, has now been published in the Official Journal of the European Union: see here. For further information about the changes being made, see here.

Europe: ESMA report on shareholder identification and communication systems

The European Securities and Markets Authority has published the results of a survey of the harmonisation of national regulatory frameworks for shareholder identification and communication systems: see here (pdf). The report is intended to assist the European Commission in respect of the implementing acts needed under Article 3 of the new Shareholder Rights Directive (the latter was approved by the Council of the European Union earlier this week: see here and here, pdf).

Europe: Parliament approval for Shareholders' Rights Directive

The European Parliament, in a Plenary session yesterday, approved the proposed Shareholders' Rights Directive: see here. The resolution was passed by 646 votes to 39 (there were 13 abstentions). The Directive now requires approval by the EU Council of Ministers. Further information about the Directive, in the form of FAQs published by the European Commission following the vote, is available here. The Directive contains provisions designed to make it easier for shareholders to exercise their voting rights; it also sets out a framework for a shareholder 'say on pay' vote in respect of remuneration; and it also sets out provisions for greater disclosure by institutional shareholders and asset managers (largely reflecting the provisions found in the stewardship codes that are being introduced across the world, including the UK).

Update (17 March 2017) - the European flag now appears; the UK flag inadvertently appeared at first.

Europe: shareholder rights in EU companies - revising the Shareholder Rights Directive

The EU's committee of permanent representatives (COREPER) has today endorsed an agreement between the Slovak presidency and European Parliament representatives in respect of a new Directive to amend the existing Shareholder Rights Directive (2007/36/EC). Further information, including a summary of the proposed amendments, is available here and here.

One of the amendments will require institutional investors and asset managers to develop and disclose their policy on engagement (or explain why they have chosen not to do so); it will also require them to describe how engagement activities are integrated in their investors strategy as well as how conflicts of interest are managed. This will place onto a statutory footing what some countries already require through stewardship codes (see, e.g., the UK Stewardship Code) and is a further example of the juridification of governance norms.

Europe: capital markets union - green paper and related consultations

The European Commission today published a green paper seeking ideas on how to create a "true single market for capital". Accompanying the green paper are two related consultations, one on the operation of the Prospectus Directive and the other on the securitisation framework. The green paper contains a short section on company law and corporate governance. In this section, the current revision of the Shareholder Rights Directive is mentioned; it is also stated that further reforms to company law may be helpful to help overcome barriers to cross-border establishment and operation.

For further information see: Commission press release | Green paper (pdf) | Prospective Directive review | Securitisation review | Capital Markets Union website.

Europe: Commission publishes governance proposals - remuneration, shareholder rights, disclosure, Societas Unius Personae

The European Commission has today published a proposal for revising the Shareholder Rights Directive, a Recommendation on corporate governance reporting and a proposal for a Directive on single member private limited liability companies: see here.

The proposed revisions to the Shareholder Rights Directive include changes to the disclosure obligations in respect of a remuneration and the introduction of a binding vote on remuneration policy for certain companies. It also imposes new disclosure obligations on proxy advisors and the requirement for shareholder approval of certain related party transactions. For further information see: FAQs | Proposed Directive (pdf) | Impact assessment: summary (doc) and full text (doc).

The purpose of the Recommendation is to provide guidance on improving the quality of corporate governance reporting for those companies required to publish a corporate governance statement under Article 20 of Directive 2013/34/EU. A copy of the Recommendation is available here (doc).

The proposed Directive on single member private limited liability companies will require Member States to make available, through their individual legal systems, a single member private limited liability company, with several harmonised features and a common name (Societas Unius Personae, or SUP). The SUP would have a minimum capital requirement of one euro. For further information see: FAQs | Proposed Directive (doc) | Impact assessment: summary (doc) and full text (doc).

Europe: implementation of the Shareholder Rights Directive

The European Commission has announced that it has referred Belgium, Cyprus, Greece, Spain, France, Luxembourg, The Netherlands and Sweden to the Court of Justice for late implementation of the Shareholder Rights Directive (2007/36/EC): see here. In its press release the Commission states:

The Shareholders' Rights Directive introduces minimum standards to ensure that shareholders of companies whose shares are traded on an EU regulated market have timely access to the relevant information ahead of the general meeting and simple means to vote at a distance. The publication of documents on the internet as well as enabling proxy voting and electronic participation are important elements of this. The Directive also abolishes share blocking and introduces minimum standards for the rights to ask questions, put items on the general meeting agenda and table resolutions.

While nineteen Member States have already fully implemented the Directive, eight Member States (Belgium, Cyprus, Greece, Spain, France, Luxembourg, The Netherlands and Sweden) still have to implement some or all of its provisions. Incomplete implementation means that shareholders in those Member states do not enjoy the same rights as elsewhere in Europe and are denied the rights the Directive gives them when investing in publicly listed companies. The deadline for implementation was 3 August 2009".

UK: amending the articles of association - City of London Law Society pro forma circular

The City of London Law Society Company Law Committee has published a pro forma circular for listed companies which contains suggested changes to articles of association to deal with the implementation of the Companies (Shareholders' Rights) Regulations 2009 and provisions of the Companies Act (2006) coming into force on 1 October 2009.

UK: ICSA guidance note on the Shareholder Rights Directive and its implementation

The Institute of Chartered Secretaries and Administrators has published a guidance note on the Shareholder Rights Directive (2007/36/EC) and its implementation in the UK through the Companies (Shareholders’ Rights) Regulations 2009. The guidance note is available here (you will need to provide the following information prior to download: name, company, position, e-mail address). 

For further information see:

Directive 2007/36/EC | European Commission: shareholders' rights | Department for Business, Innovation and Skills - shareholder rights guidance and consultation on the implementation of the Directive | Explanatory memorandum for the Companies (Shareholders' Rights) Regulations 2009 | ICSA guidance notes | 

UK: the Companies (Shareholders’ Rights) Regulations 2009

The Companies (Shareholders’ Rights) Regulations 2009 were made on 2 July and laid before Parliament a day later: see here (html) and here (pdf). The Regulations, which amend the Companies Act (2006), come into force on 3 August and apply in relation to meetings of which notice is given, or first given, on or after this date. Some of the provisions in the Regulations apply to all companies; others apply to traded companies (defined here). In the accompanying explanatory memorandum the purpose of the Regulations is explained and the policy background provided:

This instrument implements Directive 2007/36/EC on the exercise of certain rights of shareholders in listed companies (the “Directive”) by amending Part 13 of the Companies Act 2006. The Directive is intended to help facilitate the exercise of basic shareholders' rights and solve problems in the cross-border exercise of such rights, particularly voting rights, in respect of companies traded on regulated markets.

The UK has a large and prestigious equity market with a dispersed shareholder structure. Consequently the regime of shareholder rights is well-developed. Shareholder participation in company meetings and the conduct of those meetings in listed companies is governed by a mixture of statutory provision – chiefly the Companies Act 2006 Parts 9 and 13, companies’ articles of association, the Financial Reporting Council’s “Combined Code on Corporate Governance” – and case law. As a result the UK framework for shareholder rights already meets the majority of the requirements in the Directive. Our approach to implementation is to build on that existing framework by amending the Companies Act 2006 in a way which will minimise any new burdens on business".

Note: the Department for Business, Innovation and Skills has updated its Shareholder Rights FAQs and has also published the Government's response to the consultation concerning implementation of the Directive. The explanatory memorandum also states:

Guidance will be issued subject to further consultation with stakeholders.  The key changes to Part 13 will be highlighted on the Department for Business, Innovation and Skills website".

UK: the Companies (Shareholders’ Rights) Regulations 2009

A revised draft of the Companies (Shareholders’ Rights) Regulations 2009 has been published by BERR, following a consultation which ended in January. Comments are invited on the revised draft but respondents must be quick: the deadline is 29 May. The Regulations are scheduled to come into force on 3 August 2009 and will implement the Shareholder Rights Directive (2007/36/EC) by making changes to Part 13 (Resolutions and Meetings) of the Companies Act (2006).

UK: listed companies: calling general meetings after 3 August 2009

The UK's implementation of the Shareholder Rights Directive (2007/36/EC) will require several changes to the Companies Act (2006) with regard to the calling of general meetings by listed companies. The Department for Business, Enterprise and Regulatory Reform is currently consulting on the implementation of the Directive and the amendments it will make to the 2006 Act - see the DBERR consultation paper for further information; the consultation period ends on 30 January. The deadline for implementing the Directive is 3 August.

The Directive requires a minimum of 21 days for annual general meetings (this is the current requirement for public companies under Section 307 of the Companies Act (2006)). Article 5 of the Directive provides that Member States may permit other general meetings (i.e., extraordinary general meetings) to be called with 14 days' notice providing the following criteria are met:

[1] the shareholders have approved the holding of general meetings on 14 clear days’ notice by passing an appropriate resolution at an AGM; and
[2] that the company offers "the facility for shareholders to vote by electronic means accessible to all shareholders".

The Directive requires the approval required in [1] to be by no-less than a two-thirds majority. DBERR is consulting on whether this should be a 75% majority in order that it is the same as that required for a special resolution (see Section 283 of the Companies Act (2006)). Until the outcome of the consultation is known, DBERR has recommended that listed companies consider passing a special resolution at their next AGM in order that they are able to call general meetings on 14 days' notice after 3 August 2009. This resolution would need to be passed at each subsequent AGM. 

With regard to the requirement in [2] that electronic voting "accessible to all shareholders" is offered, it is noted in the DBERR consultation paper (at para. 3.16):

It is not entirely clear in this context what this final phrase covers in terms of accessibility and the circumstances when accessibility is required. For example it may mean that companies must offer the facility for members to vote electronically (eg. via the company’s website) at all times; or it might mean that any method available to vote electronically (eg. via certificate acceptable and that shareholders should use such facilities.

UK: Rights Issue Review Group report and recommendations

Amongst the documents published today, as part of the Government's pre-budget report, is the report of the Rights Issues Review Group. The Government has agreed with the Group's recommendations, which include the following short-term objectives (to quote directly from the report):

• The FSA and BERR to consult on reducing the rights issue subscription period from 21 to 14 days.
• BERR to take forward the practical transposition of the Shareholder Rights Directive to maintain the option of a 14 day notice period for companies’ general meetings.
  
• The Association of British Insurers (ABI) to review its guidance on the ceiling on allotments in light of the Group’s recommendation that it be increased from one-third to two-thirds of an issuer’s issued share capital.
  
• The FSA to continue to maintain oversight of the conflict of interest regimes with a view to reinforcing transparency between issuers and underwriters.
  
• The FSA to facilitate the development by market participants of non-prescriptive guidance on the issues that an issuer could usefully consider when embarking on a capital raising by way of a rights issue.
  
• The FSA to take forward consultation on a new form of open offer which will provide compensation and which may be run over a 14 day period in conjunction with a general meeting notice period. 

Several medium term objectives are identified, including:

• Working at the EU level for the adoption of a short form prospectus for rights issues.
  
• The possible increased use of shelf registration for equity issuance.
  
• The FSA to consider further a basis for conditional dealing in rights issues to allow the general meeting notice period and the rights issue subscription period to be run in parallel.
  
• The FSA to undertake further informal discussions on the usefulness of progressing with further work to introduce more accelerated rights issue models including for this purpose the Australian RAPIDS [Renounceable Accelerated Pro-rata Issue with Dual-bookbuild] model.
  
• The FSA market consultation on a more permanent position on short selling in rights issues.
  

UK: implementing the shareholder rights Directive (2007/36/EC)

The Department for Business, Enterprise and Regulatory Reform has today published a consultation paper with regard to the UK's implementation of Directive 2007/36/EC on the exercise of certain rights of shareholders in listed companies. The opportunity is also being taken to make some amendments to the Companies Act (2006). The Government plans to implement the Directive by the deadline (3 August 2009) and in this regard the consultation paper contains a draft of The Companies (Shareholders’ Rights) Regulations (2008/9). 

One area of company law that will be changed concerns the rules for calling meetings of the shareholders. The Directive requires that at least 21 days' notice is given for AGMs.  14 days' notice is required for other meetings subject to certain conditions being met.  These conditions are different from those currently in place and include providing "the facility for shareholders to vote by electronic means accessible to all shareholders". 

For further background information, from the European Commission's Internal Market website, click here.